By Babajide Komolafe, Economy Editor

In an operating period and economy marked by historic inflationary trend, weak economic growth amidst tough global macroeconomic conditions, United Bank for Africa, UBA, Plc posted a rare and above-industry performance which asserted its leadership position and the efficacy of its global diversification strategy.

Most profitable bank

Analysis of the financial performance of the top five banks (Tier-1 banks) in the first half of the year, H1’23, showed that UBA achieved the highest profitability and the highest growth in profitability during the period.

UBA achieved 371 per cent growth in profit before tax, PBT to N404 billion in H1’23 from N85.75 billion recorded in the first half of 2022, H1’22).  

Similarly, the banking group achieved a 437.8 per cent jump in profit after tax (PAT) of N378.24 billion, from N70.34 billion recorded in H1’22.

Analysis showed that the N404 billion PBT recorded by UBA in H1’23 was 53 per cent higher than the average PBT of N262.9 billion recorded by the other four Tier-1 banks.

Also the 371 per cent growth in PBT recorded by UBA in H1’23 was 121 per cent higher than the 167.8 per cent average growth in PBT recorded by the other four Tier-1 banks.

Thus UBA emerged as the most profitable bank in Nigeria in the first half of 2023.  

Following this performance, UBA achieved an annualised Return on Average Equity of 57.7 per cent as against 17.1 per cent a year earlier.

UBA’s profitability growth according to the audited financial statements for H1’23 was driven by increased patronage from the banking public, the bank’s increased credit support to businesses driven by efficient digital banking platforms and revaluation gains enhanced by its global diversification strategy. 

  

Growth in KPIs

Reflecting the impact of these factors, the UBA Group recorded 206.6 per cent growth in Operating Income to N783.96 billion in H1’23 from N255.67 billion in H1’22.  

As a result, the Group delivered a 164 per cent growth in Gross Earnings which rose to N981.78 billion in H1’23 from N372.36 billion recorded in H1’22.

Reflecting increased customer patronage, Customer Deposits rose by 42.4 per cent to N11.14 trillion in H1’23 from N7.8 trillion recorded at the end of 2022.

The Group’s Total Assets continued a strong upward trajectory, rising above the N15 trillion mark, as it hits N15.38 trillion, representing a 41.7 per cent leap up from N10.86 trillion recorded at the end of last year.

Reflecting the Group’s strong capacity for internal capital generation, Shareholders’ Funds increased to N1.712 trillion.

In a bid to extend this improved financial performance to its shareholders, and also in line with the Group’s culture of paying both interim and final cash dividends, the Board of UBA Group approved an interim dividend of 50k per share, which represents over 150 per cent increase over the prior year.

Global Diversification.

A major factor behind the UBA Group performance in H1’23 is its global diversification strategy which positioned the banking group to benefit from the recent exchange rate hamonisation in the official forex market.  

Reflecting the effectiveness of the global diversification strategy, UBA operates in 1,000 business offices and customer touch points in 20 African countries and in the United Kingdom, the United States of America, France and the United Arab Emirates, from where it provides retail, commercial and institutional banking services, leading financial inclusion and implementing cutting edge technology.

As a result, the UBA Group is one of the largest employers in the financial sector on the African continent, with 25,000 employees’ group wide and serving over 35 million customers globally, providing retail, commercial and institutional banking services, leading financial inclusion and implementing cutting edge technology.

Diversification benefits  

Highlighting the factors behind the superior profitability performance of the bank in H1’23, UBA’s Group Managing Director/Chief Executive Officer, Mr. Oliver Alawuba, said the exceptional performance underscored the Group’s commitment to consistently deliver value to its shareholders, adding that the Group made progress in digital payments, retail penetration and also benefited from the effect of revaluation gains, arising from the harmonization of foreign exchange rates at the different access windows in Nigeria.

  He said, “The Group recorded strong double-digit growth in revenues and profits from its operations, the result also reflects the effect of sizeable revaluation gains, arising from the harmonization of currency exchange rates in Nigeria. Our reporting currency found a new exchange level at about N756 to 1US$ as of 30 June 2023, compared to N465 at the beginning of the year.  

“The results again demonstrate the benefits of our long-held diversification strategy across Africa and globally. The growth of our international business, most recently in the UAE, only reinforces this earnings quality.

Continuing he added, “Our business is on a steady growth trajectory, as we further strengthen our risk management traditions and practices necessary technology investments to deliver premium service to our customers. We have also continued to finance landmark projects in critical sectors of the economies across Africa, facilitating intra-Africa trade with our valuable offerings and provide a versatile last-mile distribution network for Africa-bound donor and multilateral agency funds.”

“ The three core geographical pillars of our business (Nigeria, Rest of Africa and Rest of the World) are making strong contributions to the Group profit, further justifying our global strategy and business positioning across Africa, UAE, France, UK and USA, and demonstrating the benefits of positioning UBA as the financial intermediary for Africa and the rest of the world.” Alawuba said.

On the plans for the rest of the year, Alawuba said, “As we approach the last quarter of the year, the Group remains strategically positioned to sustain the strong performance, consolidating on H1 2023 results, to deliver superior returns to our esteemed shareholders.”

UBA’s Executive Director Finance & Risk, Ugo Nwaghodoh, said the half year 2023 financial numbers reflect an excellent performance across key metrics, as the bank diligently executes its strategic priorities.

“Our HY2023 financial numbers reflect excellent performance across key metrics, as we diligently execute our priorities for the year. Annualized return on average equity at 57.7% was bolstered by improved operating income and revaluation gains.” he explained.

Nwaghodoh also pointed out that the Group maintains robust capital buffers to support business growth and loss absorbency. The Group’s shareholders’ funds stood at N1.7 trillion, with a capital adequacy ratio of 36.4%”.

Contributions from Subsidiaries  

  Executive Director/Chief Executive Officer, UBA Africa, Abiola Bawuah, said the bank’s African operations have contributed close to 50 per cent of the group’s earnings, leveraging on digital offerings and products across board to gain large market shares across the different regions of operations in Africa.

Speaking recently at a press conference, she said notwithstanding the impact of devaluations and double digit inflation in Nigeria and a number of other African countries where the bank operates, the subsidiaries have been performing well, contributing significantly to the growth and development of trade, infrastructure and finance on the continent.

She said, “As at last month, none of our African subsidiaries is making a loss. They have all been turning in profits, this is a testament to the fact that they have navigated successfully and have all found their footing.

Continuing, she said, “And this extends to each and every one of them, even the ones in war-torn countries. Of course, we are aware that there is always room for improvement, but for now, we are glad that our 19 subsidiaries are out of the red zone.  

In the area of infrastructure financing, she affirmed that UBA has been bullish in financing projects across Africa, which according to her is based on the conviction that the continent needs to bridge the infrastructural gap, necessary for economic growth.  

“UBA has proven expertise and capacity in key sectors of economies across Africa especially in oil and gas, infrastructure finance, agriculture and commodity/export, and these have positioned it as a preferred partner for structured solutions to key governments and corporates operating in/into Africa,” Bawuah said. Bawuah also revealed that in the last few years, the bank has invested heavily and supported key governments of various African countries with over $1 billion in infrastructural development especially in roads, hospitals, health, power and other critical sector.